Evasion, Fraud, and America's Degrading Military Edge
Evasion, Fraud, and America's Degrading Military Edge
Raytron - How a Chinese Cluster Company Evades Sanctions
In Vermilion’s previous Holosun article, we mentioned that InfiRay (Yantai Iray Technology Co., a well known thermal and night vision optic manufacturer) is 100% owned by People’s Republic of China (PRC) nationals and entities. InfiRay also almost certainly produces equipment for the PRC People’s Liberation Army (PLA). As it turns out, InfiRay also supplies the same equipment to Russia. On 1 May 2024, the US Department of State sanctioned InfiRay for developing and supplying dual-use aerospace, manufacturing, and technology equipment to entities based in Russia.
InfiRay branded products were subsequently pulled from major distribution sites such as Amazon, but these measures are not sufficient. InfiRay has initiated a determined effort to avoid US sanctions.
What is a PRC Cluster Company?
There are some important considerations to keep in mind when examining PRC firms in general (especially those in the PRC defense or defense adjacent sectors). PRC business decisions are often driven by more than simply delivering customer value or pursuing fiduciary interests. The role of the Chinese Communist Party (CCP) is central within the PRC, and politics most reliably acts as the major driver of medium and large-scale enterprises.
It is highly likely that most PRC business executives are subject to the supervision of firm internal CCP cadre, as well as external CCP guidance. Since 2018, Xi Jinping has accelerated the formation and power of these CCP cadres embedded in PRC private sector companies.
This means that PRC businesses do not follow the Western model of primary authority deriving from the board and CEO. In the collectivist PRC model, there are a cluster of proximate individuals in charge (including the board, executives, internal CCP cadre members) and a group of external individuals and organizations (including external CCP members and PRC regulatory organs, which wield far more power than US counterparts.)
This group of proximate and external organizations and individuals decide the direction of any given large PRC company, through extremely opaque back-door channels. There is little to no external accountability, reliability, predictability, repeatability, or formalization of this practice.
Multiplying the cluster factor, many PRC firms (and again, many in the defense space) are not single entities but in fact webs of multiple companies held together at the top by a small group of executives and CCP cadre members which are the proximate individuals in charge of operations. This tactic helps PRC firms avoid consequences for endemic illegal and unethical behavior.
These webs of companies share a number of qualities, including legal complexity, international operations, and the production of military/civilian dual-use products. Cluster companies often utilize entirely separate manufacturing, import/export, and distribution firms in order to become hard targets for prosecution, discovery, or other legal action.
Example - Huawei
Huawei is a well known example of a cluster company. The founder, Ren Zhengfei, served in the PLA for over a decade and is a CCP member. Ren has previously said that in a decision between the CCP and Huawei, he would have to decide in favor of the CCP.
It helps to put this comment in context. For our American readers, this would be as if Bill Gates was popular for saying “If a decision came down between what is good for Microsoft and what is good for the Democratic Party, I would have to side with the Democrats since my principle is to serve all human beings.” This would be an insane and ludicrous statement, but because it is uttered in a CCP context by Ren, many fail to draw the correct inferences.
Huawei has all the earmarks of a PRC cluster company:
Party Influence & Collective Leadership: Ren is himself a CCP member with a direct link to the party. Significant executive functions within Huawei, such as CFO and Deputy Chair of the Board are currently occupied by Ren’s daughter, Meng Wanzhou.
Extreme Legal Complexity: While Huawei has often claimed it is a private company with no CCP relationship, the company has actually never been able to prove this. Huawei has purposely never released the entire ownership structure of the firm. Attempts to explain Huawei’s ownership have actually raised more questions than answers. At least as of 2019, the firm was 99% owned by a PRC-based trade union, of which almost nothing is known.
Military/Civil Dual-Use Products: Huawei’s 5G infrastructure technology, other telecom networks, and fiber cable products are firmly in the dual-use category.
Web of Companies: The Huawei-Skycom case which led to the arrest of Meng Wanzhou was centered around Huawei’s use of a wholly owned and directed separate subsidiary to bypass US sanctions and sell US-purchased technology to the Islamic Republic of Iran.
InfiRay, InfiRay Outdoors, iRayUSA, or Raytron? Another PRC Cluster Company
What is InfiRay and where does it fall in a complex web of corporations, subsidiaries, importers, exporters, and distributors?
The parent company of InfiRay is Raytron (烟台睿创微纳技术股份有限公司), a publicly listed company on the Shanghai Stock Exchange (688002.SS). Raytron is a national high-tech (i.e. PRC government subsidized) enterprise that develops uncooled infrared thermal imaging and micro-electromechanical system (MEMS) sensing technology for military-civil applications. Raytron’s largest customers are Hikvision (sanctioned by the US), BYD (the largest state-backed Chinese car maker), PRC defense companies, and a multitude of US and EU companies. Raytron was also identified as one of the largest manufacturers of thermal sensors for the Chinese People’s Liberation Army (PLA).
The InfiRay that was formally sanctioned by the US Department of State was “Yantai Iray Technology Co. Ltd” (referred to here as InfiRay), a wholly owned subsidiary of Raytron. InfiRay’s main line of business is manufacturing infrared thermal imaging technologies such as infrared detectors, thermal imaging modules, and night vision thermal cameras for a wide variety of military-civil applications. Additionally, InfiRay’s director, Peng Zhang, is also an executive at Raytron.
After InfiRay manufactures these thermal imaging products, they are almost certainly packaged and exported by InfiRay Outdoor, another Raytron subsidiary. Major brand names exported by InfiRay Outdoor include, but are not limited to, InfiRay, InfiRay Outdoor, Xinfrared, and RIX. InfiRay Outdoor also refers to itself as InfiRay Technology Co. and Iray Technology Co., but its actual corporate name is Hefei Yingrui System Technology Co., Ltd. (合肥英睿系统技术有限公司). Its registered agent is Zhao Fangyan (赵芳彦), a general manager and director of Raytron as well as Raytron’s Communist Party Secretary (CN).
Raytron, InfiRay, and InfiRay Outdoor are all registered to the same address at 11 Guiyang Street, Yantai Economic Development Zone, Shandong, PRC.
In order for there to be an exporter, there must be an importer. In this case, the primary importer of InfiRay manufactured products is California-based Visir Inc. The CEO Tao Huang has a relationship with Peng Zhang (Director of InfiRay) and also has a connection with the China Academy of Information and Communications Technology (CAICT).
CAICT itself is subordinate to the Ministry of Industry and Information Technology (MIIT), which is headed by Jin Zhuanglong. Jin is the tsar of Military-Civil Fusion within China, a dedicated effort by the Chinese Communist Party to promote the development of civilian technology which can be used for military purposes.
It is deeply concerning that a US company is working with an organization that is facilitating this effort. In addition to this, the CFO of Visir Inc, Sandra Chen, is allegedly the spouse of a Raytron executive. This illustrates how deeply entwined all of these entities truly are. Lastly, Visir Inc. sells InfiRay manufactured products under the “RIX Optics'' brand.
As InfiRay branded products were removed from Amazon, RIX is now one of the top searches for thermal optics. RIX states it is “a Texas-based manufacturer of Night Vision and Thermal products,” which makes it incredibly difficult for customers and sales outlets to know that the real origin of RIX products is InfiRay. These relationships are identified in Figure 1 below.
The primary distributor of InfiRay Outdoor branded products in the US is yet another company - iRayUSA. This company plays a particularly malicious role in potentially misleading customers. iRayUSA claims it is a “Texas-based designer, manufacturer and distributor of premium thermal night vision devices,” but in reality its only role is to sell InfiRay manufactured products to local dealers. CEO of iRayUSA, Tyler Adair, claimed the following after sanctions were imposed on InfiRay:
“Yesterday the OFAC announced additional sanctions related to the global Russia-Ukraine conflict that apply to over 280 additional individuals and foreign entities. These sanctions are imposed to restrict certain technology from flowing to Russia and reduce its ability to wage war against Ukraine. Among the entities named in these sanctions is Yantai iRay Technology Company Ltd.
iRayUSA’s manufacturing partner is a separate entity and is uninvolved in the cause of the above sanctions. iRayUSA’s business in distributing the InfiRay Outdoor brand is only in the commercial market in the United States of America.”
In contrast to this public statement, it is clear that iRayUSA’s manufacturing partner is indeed directly related to the sanctioned entity and is almost certainly the sanctioned entity itself. It appears the CEO of iRayUSA is either woefully ignorant of his own corporate structure or he is deliberately misleading consumers. These statements represent a greater trend of PRC-affiliated and PRC-owned firms openly lying or not being forthcoming about the actual truth.
InfiRay Outdoor Lies to U.S. Consumers
Several readers forwarded us the InfiRay Outdoor US support page as evidence that InfiRay does not have any affiliation with the PLA. The page states, “The Company [InfiRay Technology Co., LTD] does not develop solutions and/or products for the military industry, does not provide them for military applications, and none of the Company's products meet military standards.”
In contrast to this, the InfiRay Outdoor China website links to product exhibitions for the People’s Liberation Army at the Zhuhai Airshow; the largest military expo in China. This invalidates InfiRay Outdoor’s claim. Why would a company that doesn’t develop military products advertise their manufacturing partner attending China’s largest military expo and showing their wares to the People’s Liberation Army?
In addition to this, China Military reported that InfiRay participated in the 2018 Military-Technical Forum Army in Russia where InfiRay debuted thermal imaging capabilities for military use. An InfiRay representative told Russian state media that sanctions turned Russia into an importer of Chinese military equipment, a trade relationship where there are no restrictions. As stated earlier, the US Department of State caught wind of this relationship and sanctioned InfiRay on 1 May 2024.
InfiRay Supplies the People’s Liberation Army
The device in Figure 2 is almost certainly InfiRay’s version of the Common Laser Range Finder-Integrated Capability (CLRF-IC) produced by Elbit Systems (a major US optical systems manufacturer) and fielded to the United States Marine Corps. The CLRF-IC is a handheld target location system that “provides rugged day and night capabilities for reconnaissance, surveillance, and targeting operations” and can spot targets up to 1km (night) and 3km (day) away. In the past, technology like the CLRF-IC was representative of a widespread US qualitative military edge (QME), but PRC cluster companies like InfiRay are steadily eroding this edge.
It is unknown when these products were officially fielded to the PLA, but in late 2023 PLA soldiers employed InfiRay technology to support training and modernization in the Western Theater Command. It is likely this technology is increasingly widespread throughout the PLA.
It is also likely that Raytron and InfiRay produce sensors for air defense systems, forward looking infrared systems for military aircraft, and thermal optics for People’s Liberation Army weapon systems and vehicles.
iRayUSA Likely Commits Fraud
The following information is from conversations with individuals and companies who were approached by iRayUSA.
After Shot Show in Feb 2023, iRayUSA representatives approached dealers introducing themselves as a subsidiary of InfiRay and the primary distributor of InfiRay products in the US. The pitch was that InfiRay had multiple US government contracts (including contracts from the Department of Defense and Department of Homeland Security) indicating “military grade” capabilities, and new InfiRay products outperformed whatever competitors like FLIR could bring to the table - for just a fraction of the price.
This pitch was successful. While InfiRay products were already popular in the US prior to 2023, more dealers began piling onto the InfiRay hype wagon, turning the InfiRay brand into a household name in the tactical equipment and optics community.
Later in the year things started to take a turn. Several established InfiRay dealers started receiving calls from InfiRay Outdoor representatives, stating dealers needed to sell their InfiRay products as InfiRay Outdoor rather than iRayUSA, as iRayUSA did not have its own products. Some of these dealers went along with the change, and some decided to end their relationship with iRayUSA. It was unusual for two entities representing the same product line to operate in such a manner.
One dealer stated that InfiRay products are actually prohibited according to Department of Defense contract regulations and iRayUSA claims that InfiRay holds Department of Defense contracts are false.
InfiRay Tries to Evade US Sanctions
In light of US sanctions on InfiRay, the company has gone into overdrive pushing products through other brands. The current primary outlet is Xinfrared.
The Xinfrared website is significantly more straightforward than any of the information provided by InfiRay and InfiRay Outdoors. Xinfrared openly states that it, along with InfiRay and InfiRay Outdoor, is just a Raytron brand. Xinfrared also states that its registered corporate entity is Yantai Iray Technology Co. (yes, the sanctioned one). One of its directors is also none other than Peng Zhang, the same Raytron executive that works with Tao Huang of Visir Inc.
A secondary outlet, of which there are likely many, is RIX Optics. As previously mentioned, RIX products are manufactured by InfiRay and sold by Visir Inc. RIX claims it is a Texas-based manufacturer of thermal optics, but it is really just a California-based importer of thermals manufactured by a sanctioned Chinese company.
What to do About Raytron and PRC Cluster Companies?
As Raytron is a manufacturer of high-tech equipment used by the Chinese People’s Liberation Army and Russia, US sanctions should be expanded from InfiRay to cover Raytron and all Raytron subsidiaries. Additionally, all individuals associated with Raytron and Raytron subsidiaries found to facilitate evading sanctions and misleading US consumers should be sanctioned and held accountable for their actions.
On a wider scale, the US Department of State and the US Treasury Department must put more resources into identifying PRC cluster companies that contribute to PLA modernization and implement effective sanctions on these companies as a whole, not just subsidiaries. Congress should also pass a categorical ban on classes of trade that enhance the military capability of adversary nations.
For US and Allied companies who continue to do business with the likes of Raytron and other PRC cluster companies that support the PLA, transitioning away from these entities would be a prudent long-term business decision.
More Links:
Visir Inc Docs - RIX Storm Series
*InfiRay also goes by the names, iRaytek, iRay, and Arrow Optoelectronics, Yantai Airui Technology, and InfiRay Technology Co. Ltd, Airui, and Arrow.
